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HMDA reportable or not? Loan purpose was to finish renovating a rental house and is secured by a dwelling. The note was structured similar to a construction-to-perm loan, in that it is a straight line of credit with 2 quarterly interest payments then amortized out over 60 months. Even though we qualify and use the partial exemption and do not report lines of credit we feel this loan is reportable as home improvement due to it being amortized out. Are we on the right track here? Thanks for your assistance.
I think both of you are correct, but let’s be sure.
It is not clear whether the loan is open-end credit or not. You state that is a line of credit, but to be a line of credit for HMDA the line must, among other requirements, replenish itself. In other words, as the borrower pays down the balance it becomes available to draw again. If the line is open-end credit and you originate fewer than 500 open-end lines per year the transaction is exempt. If it is closed-end credit and your bank originates more than 25 closed-end loans it is covered, unless another exemption applies.
The loan could be exempt as a business purpose loan (rental property), but even so it would be covered since it is for home improvement purpose. If it is closed-end credit for home improvement, it is covered assuming you originate more than 25 closed-end loans per year.
Another HMDA question: We had a construction only loan that was not reportable in May. It was to construct apartment buildings and was secured by the apartment building being constructed and 3 rental duplexes. In July the May loan was refinanced with additional funds to complete the construction of the apartment buildings also secured by the same collateral as the May loan. We feel the July loan should be reported as a refinance or possibly home improvement (however the apartment buildings were only partially completed at this time). We are leaning toward refinance is this correct or are we way off base here?
The glossary definition of refinancing in the old guide said: “A refinancing is any dwelling-secured loan that replaces and satisfies another dwelling secured loan to the same borrower. The purpose of the loan being refinanced is not relevant to determining whether the new loan is a refinancing for HMDA purposes. Nor is the borrower’s intended use of any additional cash borrowed relevant to determining whether the loan is a refinancing, though the borrower’s intended use of the funds could make the transaction a home improvement loan or a home purchase loan?
However; I don’t see the information related to purpose in the new guide unless I am overlooking it. Thanks!
According to Section 1003.2(p) the term refinancing means a closed-end mortgage loan or an open-end line of credit in which a new, dwelling-secured debt obligation satisfies and replaces an existing, dwelling-secured debt obligation by the same borrower. Your loan appears to meet the definition of refinancing, assuming you have the same borrower on each transaction.
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